Hiring surges as U.S. gains 280,000 jobs in May

WASHINGTON (MarketWatch) — The U.S. pumped out a robust 280,000 jobs in May, showing that companies are still on the prowl for new workers despite what appears to have been a temporary slowdown in economic growth earlier this year.

The increase in hiring — the biggest since December — was widespread and suggests the economy has regained momentum. High-tech firms, health-care providers, hotels, home builders and retailers all added workers.

Only the energy industry, coping with lower oil prices, saw a sizable decline in jobs, the Labor Department reported Friday.

“The growth in the economy is reaching out to all sectors now,” said David Berson, chief economist at Nationwide, the large Ohio-based insurer.

The unemployment rate, meanwhile, rose a tick to 5.5% from 5.4%, but the increase stemmed from a large inflow of people into the labor force. More job seekers take up the hunt when they think work is easier to find and U.S. job openings recently hit an all-time high.

In another good omen, the surge in hiring in May also boosted wages. Average pay rose 8 cents to $24.96 an hour, pushing the increase over the past 12 months up to 2.3%. That’s the highest rate since mid-2013, suggesting the boom in hiring over the past few years is finally forcing companies to pay more to attract workers.

Trend in right direction

So far this year, the economy has added an average of 217,000 jobs a month, easily enough to employ new entrants in the labor force and gradually push the unemployment rate down over time.

A pickup in hiring since March also offers strong evidence that the 0.7% decline in U.S. growth in the first quarter was an aberration caused by harsh weather, a dockworker’s strike and other short-term influences that have faded or are likely to do so.

“It does lay the fears to rest that the economy is weakening,” said Kate Warne, an investment strategist at the St. Louis-based brokerage Edward Jones.

Still, job creation has tapered off from a blistering pace in the second half of 2014, when the economy added an average of 281,000 jobs a month. At the current pace of hiring it will take longer to employ a good chunk of the 17 million Americans who want a full-time job but still can’t find one, an unusually high number after six years of economic expansion.

If all those people are taken into account, the unemployment rate is 10.8%, unchanged from the prior month, according to an alternative government measure known as U6.

The persistence of such “underemployment” has been cited by Fed Chairwoman Janet Yellen as a reason why the central bank has resisted raising interest rates even though the economy is the healthiest it’s been in years.

“The unemployment rate today probably does not fully capture the extent of slack in the labor market,” she said in a speech last week.

More big job gains like in the one in May, however, could ease the problem more quickly than the Fed expects and spur the central bank to raise interest rates for the first time since 2006. Most analysts believe the first rate hike will come before the end of the year.

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